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Newpark Resources Reports Third Quarter 2018 Results

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Newpark Resources Reports Third Quarter 2018 Results

Company provides update on deepwater Gulf of Mexico entry

PR Newswire

THE WOODLANDS, Texas, Oct. 25, 2018 /PRNewswire/ -- Newpark Resources, Inc. (NYSE:NR) today announced results for its third quarter ended September 30, 2018. Total revenues for the third quarter of 2018 were $235.3 million compared to $236.3 million for the second quarter of 2018 and $201.7 million for the third quarter of 2017. Net income for the third quarter of 2018 was $3.6 million, or $0.04 per diluted share, compared to $10.8 million, or $0.12 per diluted share, for the second quarter of 2018, and $2.7 million, or $0.03 per diluted share, for the third quarter of 2017. Third quarter 2018 results include the impact of the following:

  • $1.8 million of pre-tax charges in the Corporate office ($1.8 million after-tax) associated with the retirement and transition of our Senior Vice President, General Counsel and Chief Administrative Officer, primarily reflecting the impact of modifications to certain outstanding stock-based and other incentive awards;
  • $1.1 million of pre-tax charges in the Brazil Fluids Systems business ($1.1 million after-tax), primarily related to severance costs associated with our planned workforce reductions in the fourth quarter of 2018 in connection with the completion of the current contract with Petrobras, which is scheduled to conclude in December 2018;
  • $0.8 million of pre-tax charges in the U.S. Fluids Systems business ($0.6 million after-tax), associated with the July 2018 fire at our Kenedy, Texas drilling fluids facility; and
  • $0.6 million of non-capitalizable expenses in the U.S. Fluids Systems business ($0.5 million after-tax), related to the upgrade and conversion of a drilling fluids facility into a completion fluids facility, which is expected to be operational by the end of 2018. Located in the Port of Fourchon, this adjacent facility complements our primary Gulf of Mexico deepwater shorebase and supports our product line expansion.

Combined, the impact of the above items resulted in a $4.3 million reduction in operating income and a $4.0 million reduction in net income ($0.04 per diluted share).

Paul Howes, Newpark's President and Chief Executive Officer, stated, "We're pleased to report that both segments are continuing to make meaningful strides in the execution of our long-term strategy, although our Fluids Systems segment experienced some softness in the quarter. In addition, we began to repatriate excess cash from our foreign subsidiaries in the quarter, which facilitated a reduction in our outstanding debt.

"In Fluids Systems, third quarter revenues for the segment came in at $181 million, a 1% sequential improvement. North America revenues improved by 7% sequentially, as improvement in the North America land markets were partially offset by a sequential reduction in Gulf of Mexico activities. We successfully completed our second Kronos deepwater project with Shell Oil in the quarter and have since been awarded two additional wells, which are scheduled to be drilled over the next two quarters. Despite the continued progress in our deepwater market penetration efforts, we experienced project delays with other offshore customers, which negatively impacted the Gulf of Mexico revenue contribution for the quarter. Eastern Hemisphere revenues declined by $5 million sequentially from the near-record level achieved last quarter, reflecting the anticipated reductions in Romania, Kuwait and Australia.

"Following the strong margin improvement in the prior quarter, our Fluids Systems operating margin declined to 5% in the third quarter, reflecting the impact of the $2.5 million of charges in the quarter, as well as the timing of certain expenses, including elevated bad debt charges related to revenues from prior years in our foreign operations," added Howes. "With the scheduled completion of the current Petrobras contract in December 2018, we expect a reduction in our Latin America revenues going forward, but only a minimal impact to operating income. Meanwhile, we're continuing to make organizational investments to support our total fluids strategy, which are crucial to our efforts to capitalize on our capabilities, infrastructure, and strong position to expand our total addressable market and improve our long-term Fluids Systems segment profitability.

"In the Mats & Integrated Services segment, we continue to see the benefits from our market diversification strategy, which provides meaningful growth opportunities and added stability, as reflected by the balanced contribution across both E&P and non-E&P markets. Third quarter mats revenues came in at $54 million, modestly ahead of our expectations. The seasonal decline in the utility transmission rental market was as anticipated, with the impact in this end-market somewhat offset by the continued market penetration in pressure pumping applications, where we believe our systems provide a superior work surface for gravity-fed sand systems," added Howes. "With the increasing momentum more broadly across both E&P and non-E&P markets, as well as weather-driven demand in the southern U.S, we feel confident that fourth quarter revenues for the segment will grow beyond the levels achieved in recent quarters."

Segment Results

The Fluids Systems segment generated revenues of $181.0 million for the third quarter of 2018 compared to $179.7 million for the second quarter of 2018 and $166.7 million for the third quarter of 2017. Segment operating income was $8.3 million for the third quarter of 2018 compared to $13.3 million for the second quarter of 2018 and $7.9 million for the third quarter of 2017. Operating income for the third quarter of 2018 includes $1.1 million of charges in Brazil primarily related to severance costs associated with our planned workforce reductions in the fourth quarter of 2018 in connection with the scheduled completion of the current contract with Petrobras, $0.8 million of charges associated with the July 2018 fire at our Kenedy, Texas drilling fluids facility, and $0.6 million of non-capitalizable expenses related to the upgrade and conversion of a drilling fluids facility into a completion fluids facility.

The Mats and Integrated Services segment generated revenues of $54.4 million for the third quarter of 2018 compared to $56.5 million for the second quarter of 2018 and $34.9 million for the third quarter of 2017. Segment operating income was $12.9 million for the third quarter of 2018 compared to $14.9 million for the second quarter of 2018 and $10.9 million for the third quarter of 2017.

Conference Call

Newpark has scheduled a conference call to discuss third quarter 2018 results and near-term operational outlook, which will be broadcast live over the Internet, on Friday, October 26, 2018 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate in the call, dial 412-902-0030 and ask for the Newpark Resources call at least 10 minutes prior to the start time, or access it live over the Internet at www.newpark.com. For those who cannot listen to the live call, a replay will be available through November 9, 2018 and may be accessed by dialing 201-612-7415 and using pass code 13683325#. Also, an archive of the webcast will be available shortly after the call at www.newpark.com for 90 days.

Newpark Resources, Inc. is a worldwide provider of value-added fluids and chemistry solutions in the oilfield, and engineered worksite and access solutions used in various commercial markets. For more information, visit our website at www.newpark.com.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements that address expectations or projections about the future, including Newpark's strategy for growth, product development, market position, expected expenditures and future financial results are forward-looking statements. Words such as "will," "may," "could," "would," "should," "anticipates," "believes," "estimates," "expects," "plans," "intends," and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by Newpark, particularly its Annual Report on Form 10-K for the year ended December 31, 2017, as well as others, could cause results to differ materially from those expressed in, or implied by, these statements. These risk factors include, but are not limited to, risks related to the worldwide oil and natural gas industry, our customer concentration and reliance on the U.S. exploration and production market, risks related to our international operations, our ability to replace existing contracts, the cost and continued availability of borrowed funds including noncompliance with debt covenants, operating hazards present in the oil and natural gas industry, our ability to execute our business strategy and make successful business acquisitions and capital investments, the availability of raw materials or the impact of tariffs on the cost of such raw materials, the availability of skilled personnel, our market competition, our ability to expand our product and service offerings and enter new customer markets with our existing products, compliance with legal and regulatory matters, including environmental regulations, the availability of insurance and the risks and limitations of our insurance coverage, the ongoing impact of the U.S. Tax Cuts and Jobs Act and the refinement of provisional estimates, potential impairments of long-lived intangible assets, technological developments in our industry, risks related to severe weather, particularly in the U.S. Gulf Coast, cybersecurity breaches or business system disruptions and risks related to the fluctuations in the market value of our common stock. Newpark's filings with the Securities and Exchange Commission can be obtained at no charge at www.sec.gov, as well as through our website at www.newpark.com. We assume no obligation to update, amend or clarify publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities laws. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this news release might not occur.

Newpark Resources, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)




Three Months Ended


Nine Months Ended

(In thousands, except per share data)


September
30,
2018


June 30,
2018


September
30,
2017


September
30,
2018


September
30,
2017

Revenues


$

235,329



$

236,262



$

201,663



$

698,884



$

543,374


Cost of revenues


194,730



188,480



164,587



569,665



442,608


Selling, general and administrative expenses


29,820



28,708



27,270



85,482



79,297


Other operating (income) loss, net


725



(69)



(76)



702



(127)


Operating income


10,054



19,143



9,882



43,035



21,596













Foreign currency exchange (gain) loss


(89)



458



174



594



1,100


Interest expense, net


3,668



3,691



3,586



10,659



10,245


Income from operations before income taxes


6,475



14,994



6,122



31,782



10,251













Provision for income taxes


2,831



4,148



3,469



10,070



6,949


Net income


$

3,644



$

10,846



$

2,653



$

21,712



$

3,302
























Calculation of EPS:











Net income - basic and diluted


$

3,644



$

10,846



$

2,653



$

21,712



$

3,302













Weighted average common shares outstanding - basic


90,526



89,703



85,426



89,779



84,749


Dilutive effect of stock options and restricted stock awards


2,151



2,823



2,251



2,535



2,545


Dilutive effect of 2021 Convertible Notes


905



1,265





727




Weighted average common shares outstanding - diluted


93,582



93,791



87,677



93,041



87,294













Income per common share - basic


$

0.04



$

0.12



$

0.03



$

0.24



$

0.04


Income per common share - diluted


$

0.04



$

0.12



$

0.03



$

0.23



$

0.04


 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)




Three Months Ended


Nine Months Ended

(In thousands)


September
30,
2018


June 30,
2018


September
30,
2017


September
30,
2018


September
30,
2017

Revenues











Fluids systems


$

180,970



$

179,738



$

166,726



$

538,087



$

453,399


Mats and integrated services


54,359



56,524



34,937



160,797



89,975


Total revenues


$

235,329



$

236,262



$

201,663



$

698,884



$

543,374













Operating income (loss)











Fluids systems


$

8,288



$

13,327



$

7,930



$

32,092



$

20,145


Mats and integrated services


12,925



14,853



10,941



39,864



28,762


Corporate office


(11,159)



(9,037)



(8,989)



(28,921)



(27,311)


Operating income


$

10,054



$

19,143



$

9,882



$

43,035



$

21,596













Segment operating margin











Fluids systems


4.6

%


7.4

%


4.8

%


6.0

%


4.4

%

Mats and integrated services


23.8

%


26.3

%


31.3

%


24.8

%


32.0

%

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands, except share data)

September 30,
2018


December 31,
2017

ASSETS




Cash and cash equivalents

$

52,243



$

56,352


Receivables, net

264,014



265,866


Inventories

202,707



165,336


Prepaid expenses and other current assets

18,016



17,483


Total current assets

536,980



505,037






Property, plant and equipment, net

313,989



315,320


Goodwill

44,015



43,620


Other intangible assets, net

26,424



30,004


Deferred tax assets

4,024



4,753


Other assets

2,889



3,982


Total assets

$

928,321



$

902,716






LIABILITIES AND STOCKHOLDERS' EQUITY




Current debt

$

6,453



$

1,518


Accounts payable

93,783



88,648


Accrued liabilities

44,730



68,248


Total current liabilities

144,966



158,414






Long-term debt, less current portion

181,945



158,957


Deferred tax liabilities

33,347



31,580


Other noncurrent liabilities

7,912



6,285


Total liabilities

368,170



355,236






Common stock, $0.01 par value (200,000,000 shares authorized and 106,324,356 and 104,571,839 shares issued, respectively)

1,063



1,046


Paid-in capital

615,351



603,849


Accumulated other comprehensive loss

(64,767)



(53,219)


Retained earnings

138,233



123,375


Treasury stock, at cost (15,524,613 and 15,366,504 shares, respectively)

(129,729)



(127,571)


Total stockholders' equity

560,151



547,480


Total liabilities and stockholders' equity

$

928,321



$

902,716


 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Nine Months Ended September 30,

(In thousands)

2018


2017

Cash flows from operating activities:




Net income

$

21,712



$

3,302


Adjustments to reconcile net income to net cash provided by operations:




Depreciation and amortization

34,346



28,998


Stock-based compensation expense

8,497



8,458


Provision for deferred income taxes

(2,149)



(3,489)


Net provision for doubtful accounts

2,708



1,386


Gain on sale of assets

(552)



(4,896)


Amortization of original issue discount and debt issuance costs

4,075



4,068


Change in assets and liabilities:




Increase in receivables

(16,531)



(73,512)


Increase in inventories

(34,829)



(17,348)


Increase in other assets

(1,476)



(1,621)


Increase in accounts payable

7,106



17,996


Increase (decrease) in accrued liabilities and other

(2,791)



52,421


Net cash provided by operating activities

20,116



15,763






Cash flows from investing activities:




Capital expenditures

(32,814)



(21,888)


Refund of proceeds from sale of a business

(13,974)




Proceeds from sale of property, plant and equipment

1,477



2,233


  Business acquisitions, net of cash acquired

(249)




Net cash used in investing activities

(45,560)



(19,655)






Cash flows from financing activities:




Borrowings on lines of credit

275,801



84,900


Payments on lines of credit

(254,116)



(21,400)


Debt issuance costs

(149)



(342)


Proceeds from employee stock plans

3,813



2,107


Purchases of treasury stock

(3,811)



(2,761)


  Other financing activities

2,140



1,487


Net cash provided by financing activities

23,678



63,991






Effect of exchange rate changes on cash

(3,798)



2,371






Net increase in cash, cash equivalents, and restricted cash

(5,564)



62,470


Cash, cash equivalents, and restricted cash at beginning of period

65,460



95,299


Cash, cash equivalents, and restricted cash at end of period

$

59,896



$

157,769




Newpark Resources, Inc.
Non-GAAP Reconciliations
(Unaudited)

To help understand the Company's financial performance, the Company has supplemented its financial results that it provides in accordance with generally accepted accounting principles ("GAAP") with non-GAAP financial measures. Such financial measures include earnings before interest, taxes, depreciation and amortization ("EBITDA"), EBITDA Margin, Net Debt and the Ratio of Net Debt to Capital.

We believe these non-GAAP financial measures are frequently used by investors, securities analysts and other parties in the evaluation of our performance and/or that of other companies in our industry. In addition, management uses these measures to evaluate operating performance, and our incentive compensation plan measures performance based on our consolidated EBITDA, along with other factors. The methods we use to produce these non-GAAP financial measures may differ from methods used by other companies. These measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with GAAP.

Consolidated

Three Months Ended


Nine Months Ended

(In thousands)

September 30,
2018


June 30,
 2018


September 30,
2017


September 30,
2018


September 30,
2017

Net income (GAAP) (1)

$

3,644



$

10,846



$

2,653



$

21,712



$

3,302


Interest expense, net

3,668



3,691



3,586



10,659



10,245


Provision for income taxes

2,831



4,148



3,469



10,070



6,949


Depreciation and amortization

11,591



11,484



9,754



34,346



28,998


EBITDA (non-GAAP) (1)

$

21,734



$

30,169



$

19,462



$

76,787



$

49,494




(1)

Net income and EBITDA for the three months and nine months ended September 30, 2018 include a corporate office charge of $1.8 million associated with the retirement and transition of our Senior Vice President, General Counsel and Chief Administrative Officer, $1.1 million of charges in Brazil primarily related to severance costs associated with our planned workforce reductions in the fourth quarter of 2018 in connection with the scheduled completion of the current contract with Petrobras, $0.8 million of charges associated with the July 2018 fire at our Kenedy, Texas drilling fluids facility, and $0.6 million of non-capitalizable expenses related to the upgrade and conversion of a drilling fluids facility into a completion fluids facility.

 

Fluids Systems

Three Months Ended


Nine Months Ended

(In thousands)

September 30,
2018


June 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Operating income (GAAP) (1)

$

8,288



$

13,327



$

7,930



$

32,092



$

20,145


Depreciation and amortization

5,178



5,317



5,540



15,785



16,221


EBITDA (non-GAAP) (1)

13,466



18,644



13,470



47,877



36,366


Revenues

180,970



179,738



166,726



538,087



453,399


Operating Margin (GAAP)

4.6

%


7.4

%


4.8

%


6.0

%


4.4

%

EBITDA Margin (non-GAAP)

7.4

%


10.4

%


8.1

%


8.9

%


8.0

%



(1)

Operating income and EBITDA for the three months and nine months ended September 30, 2018 include $1.1 million of charges in Brazil primarily related to severance costs associated with our planned workforce reductions in the fourth quarter of 2018 in connection with the scheduled completion of the current contract with Petrobras, $0.8 million of charges associated with the July 2018 fire at our Kenedy, Texas drilling fluids facility, and $0.6 million of non-capitalizable expenses related to the upgrade and conversion of a drilling fluids facility into a completion fluids facility.

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)


Mats and Integrated Services

Three Months Ended


Nine Months Ended

(In thousands)

September 30,
2018


June 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Operating income (GAAP)

$

12,925



$

14,853



$

10,941



$

39,864



$

28,762


Depreciation and amortization

5,427



5,248



3,401



15,788



10,414


EBITDA (non-GAAP)

18,352



20,101



14,342



55,652



39,176


Revenues

54,359



56,524



34,937



160,797



89,975


Operating Margin (GAAP)

23.8

%


26.3

%


31.3

%


24.8

%


32.0

%

EBITDA Margin (non-GAAP)

33.8

%


35.6

%


41.1

%


34.6

%


43.5

%

Ratio of Net Debt to Capital

The following table reconciles the Company's ratio of total debt to capital calculated in accordance with GAAP to the non-GAAP financial measure of the Company's ratio of net debt to capital:

(In thousands)

September 30, 2018


December 31, 2017

Current debt

$

6,453



$

1,518


Long-term debt, less current portion

181,945



158,957


Total Debt

188,398



160,475


Total stockholders' equity

560,151



547,480


Total Capital

$

748,549



$

707,955






Ratio of Total Debt to Capital

25.2

%


22.7

%









Total Debt

$

188,398



$

160,475


Less: cash and cash equivalents

(52,243)



(56,352)


Net Debt

136,155



104,123


Total stockholders' equity

560,151



547,480


Total Capital, Net of Cash

$

696,306



$

651,603






Ratio of Net Debt to Capital

19.6

%


16.0

%

 

Contacts:

Gregg Piontek


Senior Vice President and Chief Financial Officer  


Newpark Resources, Inc.


gpiontek@newpark.com  


281-362-6800

 

 

Cision View original content:http://www.prnewswire.com/news-releases/newpark-resources-reports-third-quarter-2018-results-300738268.html

SOURCE Newpark Resources, Inc.

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